October 2003
Annual Convention Issue: ABLs Await Economic Upswing

Asset-Based Lending to Retailers: A Ten-Year Retrospective
By Ward Mooney, Fleet Retail Group

As the stigma of pledging inventory has finally disappeared, the future for asset-based lending to retailers remains exciting with many new innovative transactions being structured. The market has evolved and matured and new participants and investors have been attracted to secured underwriting for retailers.

(Ref # RETAIL004)

Making a Graceful Exit Before the Exit Light Snuffs Out
By Kenneth Wendler, CIT/Business CreditKeeping a casual yet vigilant eye out for warning signs of weakening credit quality is certainly prudent, but even more crucial perhaps is that ABLs establish the right rapport with a deeply troubled borrower long before it ever becomes deeply troubled. (Ref # RETAIL004)

Exit Strategies for ABLs: Asset-Based Loans & the Secondary Market
By Keith B. Stein, NachmanHaysBrownstein, Inc.

The mainstream nature of current asset-based lending activity has served to increase the number of opportunities for varying exit strategies for asset-based lenders. The growth in the size of the secondary loan markets, and the increase in the realization by hedge funds and other investors of the potential returns associated with distressed situations have increased interest in the asset class and therefore liquidity of the market. (Ref # IND040)

Kmart, WorldCom & Adelphia: Mega-Issues from Mega-Cases
By Randall L. Klein & Dimitri G. Karcazes, Goldberg Kohn’s Bankruptcy & Creditors’ Rights Group

This article examines some of the recent issues that have arisen in the mega-cases of Kmart, WorldCom and Adelphia and analyzes fundamental bankruptcy principles that have interfered with the agendas of some of the constituents in these cases. (Ref # BANK004)

Surviving in Today’s Competitive ABL Climate
By Michael Maiorino, Sovereign Bank

Surviving in today’s extremely competitive asset-based lending arena requires more than a plain vanilla approach to the market. Companies must differentiate their approach to the business by developing value added niches, cross-selling other products and targeting specific market segments most suited to their institution’s size. (Ref # IND042)

Fraudulent Invoicing: Going Beyond the Bill of Lading
By Robert W. Wood, Freed Maxick ABL Services, Inc.

Examiners frequently rely on the shipping test to ensure that fraudulent invoicing is not occurring. However, a signed and dated bill of lading doesn’t always mean that a company is not engaging in unethical business practices. Sometimes, it may be necessary to go beyond the bill of lading. (Ref # FRD004)

Quest for Excellence…Fostering Relationships Among Team Members
By Joseph A. Accardi, Siemens Financial Services

It is essential that credit risk and business development officers work together to “row the boat in the same direction”. Minimizing conflict is a key, and it can be achieved by each having an understanding and a respect for the responsibilities and contributions of the other party. (Ref # CARM003, CRD009)

High Yield Bond Market…Opportunities Abound for ABLs
By Barry Bobrow, Banc of America Securities

As the economy has begun to improve during 2003, the nature of the financing opportunities for asset-based lenders has changed. One of the most significant drivers of this change has been the dramatic turnaround in the public high yield bond market in 2003. (Ref # IND041)

GE GSF & PDM Bridge…Bringing Operational Expertise to the Financing Table
By Bradley Byrd and Steven Montross, GE Global Sponsor Finance

When PDM Bridge, a steel fabricator that produces components for bridge structures was looking for ways to drive operational improvements, GE Global Sponsor Finance (GE GSF) delivered value-added operational services to complement its financing capabilities. The result was a savings of nearly $2 million in annual capital cost savings and practical insights yielding other tangible bottom line results. (Ref # GEN003)

What Constitutes a Certified Inventory Appraisal?, Part I
By Scott M. Creel, ASA, Value Resource Group, Inc.,

Unlike a real estate report, an inventory appraisal has no real standardized, formal structure. In other words, the inventory valuation can not only be compiled by virtually anyone, but can contain (or not contain) virtually anything. This article discusses what constitutes a certified inventory appraisal.

(Ref # APP012)

Out of the Woods Yet? ABLs Position for Economic Upswing
By Tom Hidder and Dan Kramer, ORIX Financial Services

Day after day, we continue to see the positive headlines in papers across the country indicating that the economy is on the upswing. This is good news as businesses begin to reassess their financial situations. Regardless of the perceived upswing in the economy, the lending industry is continuing to employ conservative lending practices until a firm track record of an economic recovery is in place.
(Ref # IND088)

DIP Lending: Opportunity Lost or Already Taken?
By Josef Athanas and David S. Heller, Latham & Watkins LLP

This article provides an overview of what generally happens to asset-based loans in Chapter 11 cases, the nature of so-called “defensive” and “offensive” DIP financing and what this all means for an asset-based lender considering creating a DIP financing product or specialty. (Ref # IND043)

Collateral Reviews: A Never-Ending Roller Coaster Ride
By Henry L. Mittelman, The Ozer Group

Consumer products inventories are a never-ending roller coaster ride. As long as the lender anticipates the inclines, sharp descents, twists, and turns of the roller coaster, the experience need not be a scary one. (Ref # FRD003)
Columns

A PROFILE OF SUCCESS
Changing the Pattern of Business
A Profile of Lawrence A. Marsiello, Vice Chairman & Chief Credit Officer of CIT Group Inc.
The son of a pattern maker shaped a leading factoring company and changed the fabric of the commercial finance industry. Larry Marsiello’s career began in 1974 with Manufacturers Hanover Commercial Corporation. Today he is Vice Chairman and Chief Credit Officer of CIT Group, one of the nation’s largest commercial lenders.
(Ref # EXEC063)

PUTTING IT TOGETHER: ANATOMY OF ABL TRANSACTIONS
How a Complex Deal Simplified Jacuzzi’s Business
By Brian McDonald, Fleet Capital Corporation

It’s hard for any company to focus on growing its business while in the midst of divesting assets and restructuring debt. With the closing of a recent $200 million asset-based credit facility and the refinancing of another $445 million in debt, the company now is poised to build on its position as the world’s leading bathroom, spa and plumbing products manufacturer and distributor.

(Ref # DLS008)

TURNAROUND CORNER
Playing it Smart in Market Recovery
By William H. Runge, Alvarez & Marsal

With the economy showing signs of recovery, it is critical for business leaders in all industries to consider lessons learned from the most recent cycle, and to continue to apply those lessons. If applied effectively, they can potentially right the ship, and stave off disaster. (Ref # TM017)

LEGAL EYES
Debtor-in-Possession Financing: A Changing Landscape
By Cathy L. Reece, Fennemore Craig

While DIP loans continue to be a very profitable business for lenders and are attractive because they carry high interest rates and fees, certain non-monetary terms in interim DIP financing orders are being challenged by the Bankruptcy Court on a consistent basis. Lenders should be prepared to think “outside the box” if the Bankruptcy Court is not willing to grant the provisions that are requested. (Ref # LGL024)

FACTORING FOCUS
Disaster Recovery Systems: Still Lacking a CEO’s Warm Embrace
By R. Gavin Worthy, Metro Financial Services

Disaster Recovery Systems are essential to each and every one of our businesses. They are becoming more mainstream within our business society, but still lack the warm embrace from business owners that they notably deserve. A solid and well thought out Disaster Recovery System that is effectively executed when called upon will be the best investment a company could ever make. (Ref # FAC029)